European stock markets volatile as ECB keeps interest rates on hold

The European Central Bank announced, as anticipated, that it will make no changes to key interest rates while deflation concerns mounted.

Mario Draghi confirmed this during a press conference in Brussels. The ECB’s key lending rate remains at 0.25%, the deposit rate stays at 0% and the marginal-lending rate at 0.75%.

Draghi justified the ECB’s decision, highlighting the expectation for a gradual upward movement in inflation rates towards the target of 2% in the medium- and long term.

At the same time, he did not exclude the option of quantitative easing, stressing: “We will monitor developments closely and act swiftly if required.” He added that the governing council of the ECB was in agreement that this would include”all mechanisms within its mandate, including QE.” 

In anticipation of the ECB decision, key European stock market indices including the STOXX Europe 600 Index, the German DAX 30 Index and the Dutch AEX dropped ahead of the ECB statement. Currency markets responded with the Euro swinging higher against the Dollar ahead of the press conference. 

Stock indices rose slightly throughout the conference, as Draghi stressed the governing council’s unanimous commitment to use both conventional and unconventional monetary measures.

Deflation concerns mounted this month with Markit reporting a fall of its PMI figures from 53.3 to 53.1% between February and March, as reported earlier

 

Helsinki

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